Ambitious New Climate Act Benefits Green Firms, With Manageable Market Transition Risks

The Inflation Reduction Act of 2022 is considered the most ambitious climate policy action in U.S. history, providing support for clean technologies and incentives to reduce emissions.
Studying stock market reactions to news events related to the Act shows clear differences between green vs brown firms, indicating the policy's impact across industries.
Green firms benefited from the Act's announcement while brown firms did not, with statistically and economically significant stock market responses.
The results contribute to research on pricing climate risks and transition risks in financial markets.
The market response to the Act, while significant, did not cause financial instability or stress, suggesting ambitious climate policy transition risks may be manageable.

brookings.edu

Relevant topic timeline:

8/18/2023

For climate tech startups, the IRA is starting to pay off

The main topic is the impact of the Inflation Reduction Act (IRA) on clean energy startups in the United States. Key points: 1. Private investment in climate tech startups is expected to match or exceed government funding as investors see a growing market for clean energy technologies. 2. More than 270 new clean energy projects have been announced, with private investments totaling around $132 billion, with a majority going towards electric vehicles (EVs) and batteries. 3. The IRA has provided funding and incentives for various sectors, including solar, energy storage, energy transmission, hydrogen, carbon capture, domestic EV manufacturing, and EV charging. Startups in these sectors can benefit from the IRA through customer sales, access to debt financing, tax credits, and project-level incentives.

8/20/2023

Vinfast takes a wild ride, a robotaxi fallout brews and the IRA one year later

Main topic: The effect of the Inflation Reduction Act on the automotive industry and climate tech startups. Key points: 1. The IRA has accelerated the battery factory trend in the automotive industry. 2. Startups in the climate tech sector are starting to see more deal flow. 3. The White House's efforts to combat climate change have sparked a tech arms race with the EU. Hint on Elon Musk: Elon Musk is not mentioned in the provided text.

8/22/2023

Insight Weekly: Climate law faces hurdles; US borrowing surges; banks revise uninsured deposits

The US Inflation Reduction Act (IRA) has led to increased investments in critical mineral projects and hydrogen producers, but its long-term impact depends on mine permitting rule changes and tax credit guidance; the US Treasury plans to issue $1.859 trillion of debt in the second half of 2023, weighing on bond prices; and new guidance from the Federal Deposit Insurance Corp. has resulted in revisions to uninsured deposit totals for several banks.

9/5/2023

The US broke global trade rules to try to fix climate change – to finish the job, it has to fix the trade system

The 2022 Inflation Reduction Act, aimed at fighting climate change, has prompted significant government spending and private investment, but it also violates international trade rules, highlighting the need for a modernized international trade system that supports climate goals while minimizing protectionist measures.

9/13/2023

Inflation Reduction Act Puts U.S. on Track for Major Cuts in Carbon Emissions

The U.S. economy is projected to reduce carbon dioxide emissions by 35-43% by 2030 through the Inflation Reduction Act, which provides tax credits for electric vehicles and renewable energy production.

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Posted 9/19/2023, 1:50:09 PM